09:38, 06 June

Rallies up to 25500 as Fed Watches Closely

In the last few days the US30 index has rallied strongly to return to back above the 25000 level and reach a one week high around 25500. In the couple of weeks prior, the index had reversed and eased lower again falling to a four month low around 24600 before the recent rally. Despite its recent excursion below this level, the 25000 level still remains likely to offer some support to the index.
Having offered significant resistance a number of times this year, the 26000 level again looms above ready to repel any more rallies, and the index may remain in between it and 25000 level for a little while. The month of May has seen a strong decline for the index moving from a near all time high around 26700 down to its recent four month low.

Throughout April and prior to its decline, the index had done well to steadily move higher and finally push through the resistance at the key 26000 level and move to a six month high above 26600. It had been receiving some support from the 26000 level however this has now given way and again may provide some resistance to prices rallying higher. Throughout February and March the US30 index seemed to have been content to trade in a narrow range roughly between 25400 and 26200, before the recent break.

In early February the index consolidated in a narrow range right above the significant level of 25,000 before it began its slow climb higher. It was able to resume what has become a very steady climb higher which started back in December. At the end of January, the 25000 level offered some resistance to the index however this was quickly broken through, only for the level to prop up the index since, and this level remains key.

The Vice Chairman of the U.S. Federal Reserve, Richard Clarida said the economy is in a good place but he and his fellow Fed officials are willing to take action if conditions change.  “We will put in policies that need to be in place to keep the economy, which is in a very good place right now, and it’s our job to keep it there,” he said in an interview with CNBC.  Financial markets are expecting at least two interest cuts this year, however the central bank’s most recent forecast is to leave rates unchanged.  In his interview Mr Clarida said he will be watching closely the ongoing trade war and the inverted yield curve in the bond market, for clues about where the Fed should go next.  “I’m not going to look into a crystal ball. I will look into the past,” Clarida said. “That has been in the monetary policy toolkit in the past.”  Earlier in the day, Fed Chair Jerome Powell said policymakers are watching trade and other developments, and are committed to do what’s necessary to keep the economic expansion going.